Black Swan Events

Impact

Can cause a change in a formerly held belief or system of beliefs.

Definition

An event that is unpredictable, results in severe and widespread consequences, and is rationalized as having been predictable after its occurrence (hindsight bias).

Origin Book

Fooled by Randomness

Applicability

Global financial markets, technology systems, company-specific infrastructure, political landscapes.

Field of Study

Finance, Economics, Risk Management, AI Systems

Popularized By

Nassim Nicholas Taleb

Characteristics

Rare, unexpected, low probability, significant impact, causes severe market volatility and potential financial losses.

1929-10-24

1987-10-19

2001-09-11

2001

2008

2020

Recent

A black swan event, a phrase commonly used in the world of finance, is an extremely negative event or occurrence that is impossibly difficult to predict. In other words, black swan events are events that are unexpected and unknowable. The term was popularized by former Wall Street trader Nassim Nicholas Taleb, who wrote about the concept in his 2001 book Fooled by Randomness. [...] Black swan events are rare and unexpected events with severe consequences with the potential to cause a change in a formerly held belief or system of beliefs. In his book, Taleb notes the three defining attributes of a black swan event: 1. An event that is unpredictable. 2. A black swan event results in severe and widespread consequences. 3. After the occurrence of a black swan event, people will rationalize the event as having been predictable (known as hindsight bias).

What Is a Black Swan Event? ------------------------------- Black swan events are rare and unpredictable occurrences, usually, with significant consequences. The name “black swan events” is derived from the ancient belief that black swans didn’t exist until they were discovered in the wild. Since then, this creature has often been used to symbolize events that seem impossible until they happen. [...] Black swan events are rare and unpredictable occurrences. Often, they have a profound impact on financial markets by leading to severe and sudden changes. Some popular historical examples are the Wall Street Crash of 1929, Black Monday in 1987, the 2008 financial crisis, and COVID-19. These events highlight the need for traders and investors to be prepared for extreme market conditions. [...] _Black swan events are those rare and unexpected occurrences that can shake financial markets._ Often, these events lead to severe market volatility and massive financial losses. Most market participants face sudden declines in asset values and are forced to exit at a huge loss. _Can you avoid them? Definitely not._ _But, can you prepare for them? Definitely yes._

With AI deeply embedded in critical systems, the potential for unforeseen, high-impact disruptions (so-called ‘Black Swan’ events), demands attention. Popularized by Nassim Nicholas Taleb, the term refers to unpredictable occurrences that defy conventional expectations and only appear foreseeable in hindsight. These events can emerge from unanticipated system failures, ethical dilemmas, or unintended consequences of machine learning (ML) algorithms. Their disruptive potential necessitates [...] In the AI context, these events could arise from the complexity and interconnectivity of systems. Factors like algorithmic opacity, reliance on incomplete datasets, and the unpredictable nature of ML models contribute to the difficulty in foreseeing such incidents. The origins of black swan events in AI can range from technical issues, such as undetected bugs in the system, to external factors like malicious attacks or unexpected user interactions. [...] Despite advancements in AI, predicting black swan events remains a major challenge, largely due to their unpredictability and lack of generalizability. Black swan events appear, by definition, novel and unprecedented. They don’t fit into existing patterns or models, making it difficult for AI, which relies on past data to make predictions, to anticipate them. This is compounded by the limited historical data available for rare events, which further hinders AI’s ability to identify potential

Black Swan Event =============== Image 1: cockroachlabs-logo-170 Product Solutions Resources Pricing Company Contact us Sign in Get started free CockroachDB Glossary Black Swan Event ================ A black swan event is an event that has the following three attributes: 1. It was unexpected. 2. It had significant, wide-ranging consequences. [...] More commonly, though, discussions of black swan events in technology are company-specific, meaning that a “black swan event” is an event that significantly and negatively impacts the company’s services, generally due to some kind of infrastructure failure or outage. ### Examples of potential company-level black swan events in technology include: Cloud provider outages. Power outages. System failures. Human mistakes. [...] On a global scale, a black swan event in technology could be something like a coronal mass ejection from the sun causing a kind of natural EMP that knocks out electronic systems over a large area. (Whether this would be a _true_ black swan event is debatable, considering that it has happened before, but it happens only rarely and is considered unlikely).